Spectrum jigsaw for ACMA auction

The Australian Communications and Media Authority has begun planning for the auction of the lucrative 700MHz and 2.5GHz "waterfront" spectrum block for future mobile broadband services, planning a complex auction process that aims to get the most cash in return.

The Australian Communications and Media Authority has begun planning for the auction of the lucrative 700MHz and 2.5GHz "waterfront" spectrum blocks, which carriers hope to use for future mobile broadband services — a complex process the government hopes will rake in the most cash possible.

The ACMA will use a "Combinatorial Clock Auction" format for the sale in late 2012 of 90MHz of spectrum in the 700MHz band and 140MHz in the 2.5GHz spectrum band.

This method will allow bidders, such as telcos, to determine which portions of spectrum they want to bid on, specifying the geographic location and parts of the spectrum band they want. For example, a large mobile telco might want to buy specific spectrum on a nationwide level for the deployment of Long Term Evolution (LTE) or 4G networks, while other smaller companies might only need spectrum in one regional location.

The ACMA will divide the available spectrum into portions. The value of the spectrum will be determined through bidding rounds, where prospective buyers will say how much they want to pay for specific pieces of the spectrum. The price of each segment will rise depending on the demand for that segment, with additional bidding taking place in subsequent pricing rounds. The bidding stops when there is no excess demand for the spectrum.

After that, the carriers have a final chance to put in their best bids for the spectrum they want (and have bidded on).

The ACMA said that ultimately this method would ensure that bidders get contiguous chunks of spectrum they will actually use, using the metaphor that a potential buyer would not bid on a left shoe without also going for the right one.

The ACMA will set a reserve price for the spectrum. While the reserve has not yet been set, the government is expecting to make over $1 billion from the auction.

Chairman of the ACMA, Chris Chapman said that the Combinatorial Clock Auction method had already been proven as a successful auction method in Austria, Denmark and the Netherlands.

"The Combinatorial Clock Auction, otherwise known as CCA, has already been used successfully overseas and is the methodology most likely to produce an efficient allocation of spectrum," he said in a statement.

The ACMA indicated that, should the government allocate emergency service organisations a portion of the 700MHz spectrum in advance, which those organsiations have been seeking, it would serve to drive up the demand for the remaining spectrum in this band, and would force up the price the spectrum would sell for.